Summit Fund Reaches the Top; Manager Sees Lots of Good 'Junk'

Portfolio manager Steven Sutermeister walked into his office recently under a banner that read, "You're not as smart as you think you are."

He says the sign, put up by co-workers, was a gentle reminder that you have to keep a firm eye on your portfolio when running a high-yield bond fund - even the No. 1 such fund in America.

Mr. Sutermeister runs the Summit High Yield Fund, whose 49.8 percent cumulative return leads the high-yield category for the period since its inception in June 1994, according to Lipper Analytical Services in New York.

So far this year, the fund is among the top four in the category, according to Morningstar, another fund-tracking service (see chart). It currently yields 9.7 percent.

Despite a rough spring for the junk bond market, money continues to flow into his fund, Sutermeister says. The minimum initial investment is $1,000.

And he puts new cash to work right away. The fund's tidy size - just under $40 million in assets - lets him keep close watch on his securities: currently 46 bonds with an average maturity of about seven years.

Sutermeister does not believe in market timing, preferring to buy bonds for their intrinsic value, based on factors such as yield and risk of default.

Credit quality of high-yield products is "better than ever," he says, with scores of new issues constantly coming to market. He likes cable companies and the energy sector, the latter as a defense against a stock market drop.